Archives

Bank seeks $9.5M from Tucson condo project

TUCSON — A group of California investors intent on converting apartments into condominiums walked out on a $12.6 million loan and is keeping the rent from the units in the meantime, according to a recent complaint.

Texas-based Comerica Bank filed suit against Pantano Coastal LLC and its main principal, Ralph Giannella of La Jolla, Calif., who had received the loan to upgrade and convert 136 apartments near the corner of Broadway and Pantano roads.

It’s the latest sign of the Arizona real estate debacle, which has led to a record number of mechanic liens, loan defaults and foreclosures.

According to the 32-page complaint, Comerica agreed to loan Pantano Coastal money in March 2006. To secure repayment of the loan, Pantano pledged the entire property and its rents as colateral.

But as the real estate scene soured, so did the financial outlook for the condo-conversion project. The maturity date of the loan was extended 90 days until December 2007, and other parts of the deal were tweaked, according to the complaint.

But after the maturity date came and went, Pantano Coastal had yet to make a single payment on the loan, the complaint claims. Any missed payments were subject to a 5 percent charge.

Comerica claims the company also withheld rent monies at the time and did not pay almost $60,000 in property taxes that were due for the site. It is upset because this impairs the bank’s security for the loan.

By the Comerica’s math, Pantano Coastal now owes $9.5 million on the project. It is asking a federal judge in Tucson to rule against the company and foreclose on the property to bring it under bank control.

Phoenix lawyers Mark Nadeau and Allison Harvey are representing Comerica Bank.

For students, ASU dorm is caviar in an instant-noodle world

TEMPE — Some lucky Arizona State University students living in Tempe will get an experience unlike anyone before them.

Vista Del Sol, a new student housing development for freshmen, sophomores, and upperclassmen alike is set to open its doors for the fall semester of 2008. The new development, which is located at South Campus on Apache Boulevard, has been in construction for just over a year, and is set just across the street from campus in between Ocotillo Hall and Adelphi Commons.

It will set the new standard in student living with its own theater, tanning salon, and game rooms featuring flat-screen TVs, billiards, foosball and other amenities.

For students who plan on living on or near campus, the new student housing offer top-tier living arrangements just a few minutes walk from campus.

“I waited in line for over an hour just to get an application,” says Anthony Robinette, an ASU marketing major entering his fourth year. “It would be perfect for me because it’s so close to campus, and I don’t have a car.”

Robinette and his roommate hope to move into a two-bedroom apartment at Vista Del Sol this fall. The complex offers apartments ranging in size from one bedroom and one bath up to four-bedroom, four-bathroom units. The prices are roughly $50 more per room than those at the Gateway at Tempe, the current student housing in place on University Drive.

This makes Vista Del Sol pretty competitive. And many of the students like Robinette who applied for housing in the spring have been wait-listed while the complex checks the availability of apartments.

“I was going to try to move into the complex as an R.A., but they don’t have them”, says Dominique Gandy, an ASU senior who has worked in Residential Life since 2006.

While the new apartments are made specifically for students and they referred to as “student housing” on the website, it is not a dormitory in the typical sense. Many of the dorms on campus, such as Manzanita, Sonora, and Palo Verde residence halls, require that residents be first-time freshman and subject to live-in Residential Assistants.

Vista Del Sol, however, offers housing for students of all ages and grade levels, and does not have any live-in RAs.

“We will have Community Assistants living with the students,” says Nick Hulsey, a leasing assistant who works at Vista Del Sol. “They will be there to help the residents, rather than patrol and punish them.”

The complex will also have its own basketball court, volleyball court and outdoor amphitheater. Each unit will come complete with a full kitchen, a washer and dryer, and its own furnishings. Cable television, Internet access and full-size beds will be included.

= = =

>>Email the editor at aklaw@zoniereport.com.

Housing: The Phoenix bargain bin

PHOENIX — With many Valley homes in foreclosure and government-insured loans available to boost a sagging economy, the Valley is currently rapidly becoming a buyer’s market for first-time home buyers.

While interest rates have fallen to a 20-year low 5.5 percent and prices of homes drop have dropped a record 8.5 percent over the past year, many first-time home buyers are being rewarded for their patience.

“The people that don’t own homes right now, that should be their primary move,” says Anthony Kamouzis, owner of Maricopa-based Desert Allstarz Realty. “You have low prices, low rates and lots of incentives such as down payment assistance. If you only have $500 or a thousand bucks, you can buy a house right now.”

Typically, it costs up to $12,000 down to buy a $200,000 house (though 20 percent down is encouraged to avoid paying private mortgage insurance, or PMI). Today, with incentives, people are getting into homes for as little as no money down.

“They’re trying to do this stuff to boost the economy and get the housing market rolling again,” Kamouzis says. “It’s the perfect time to buy. People buy clothes when they’re on sale. They buy groceries when they’re on sale. Right now, houses are on sale. The financing that comes with houses is on sale.”

Lending guidelines are more strict today than they were in the early to mid-2000’s because of everything that has happened in the market. During the housing boom of the early to mid-2000’s, people with sub 600 credit scores were approved for loans. These sub-prime loans, or loans taken out by borrowers with poor credit, carried adjustable or variable interest rates (loans that start out with a low fixed rate the first few years, then balloon over the life of the loan), which has led to the high number of foreclosures in the Valley.

Some Valley Realtors and brokers have balked at certain financing practices. One popular method was dubbed the “NINJA” loan – mortgages acquired where the homebuyer had No Income, No Job or Assets.

“In 2004, they could get you a loan with a 500 credit score. You didn’t have to have good credit. Now you have to have good credit. If you do, the benefits that are there for you are fantastic,” Kamouzis says. “You don’t even have to have money, more important than anything right now is good credit.”

The favorable market for people with good credit has Valley residents, such as 28-year-old James Van Zanen of Chandler ready to take advantage of an opportunity. Van Zanen is planning on becoming a first-time homebuyer and believes now is the time to act.

That “time” is expected to last until mid 2009, which is when flagging home values and sales are expected to rebound, according to a recent panel of Valley real estate experts.

“With families foreclosing on houses all across the Valley as homes are on sale and interest rates are low, it made me want to get in on the market while it’s still good. In three to four years the market will return to normal and I will have made a pretty penny,” Van Zanen says.

= = =

>>Email the editor at aklaw@zoniereport.com.

Sedona’s cheap housing disappears under mansions

SEDONA — Mike Horner is a cashier at a mom-and-pop convenience store in Sedona. Over the past 17 years, he has downsized from a three-bedroom home in West Sedona to a trailer in Oak Creek Mobile Lodge on Highway 179.

His 16-year-old son, Brooks, lives with him. Soon, his 18-year-old daughter, Esme, will leave Flagstaff and move in.

When Horner first moved to Sedona, he could rent a three-bedroom house for about $675. When he re-entered the rental market after his divorce, rents were about $1,000 for a two-bedroom house. So he moved into Oak Creek Mobile Lodge because it was a good deal.

Now Horner believes his days as a Sedona resident are numbered. Oak Creek Mobile Lodge is on the chopping block. The property owner, Don Campbell, plans to remove the park’s 59 trailers and build about 50 condominiums.

Horner is dubious about the city’s intentions to do something – anything – about affordable housing in Sedona. To him, it’s empty talk about doing what’s best from people who cater more to the rich than to the “regular people” that make the town tick.

“They have a lot to say but it doesn’t seem to do any good. It’s like they have their own agenda and a deaf ear,” says Horner, who spoke to TZR under the condition that his real name not be used. “I haven’t seen them put up any low-income housing. I don’t think they’ve done anything.”

It’s been almost three months since the Sedona City Council approved new rules to encourage the construction and retention of affordable housing. City officials have been talking about the housing problem since at least 1992.

Little has changed, and Horner was not impressed by the news.

“Oh? I’m not sure what you’re talking about,” Horner says as he bags a customer’s cigarettes and six-pack. “Have a good night, George.”

Instead, Horner will move to nearby Cornville, Ariz., where he owns a piece of land with a run-down mobile home on it.

“If [the landlord] says we have to go, I’ll make my Cornville property livable,” says Horner, who plans to continue working at the convenience store in Sedona.

SEDONA: WIDEST AFFORDABILITY GAP IN ARIZONA

Affordable housing is defined by the relationship between housing prices and household income – what one can reasonably buy or rent without financial hardships. Experts say monthly housing should represent no more than one-third of one’s monthly income over the long run, such as a 30-year mortgage or more.

With that in mind, Sedona has the highest affordability gap in the state, according to a report distributed at the Governor’s Housing Forum in September 2007. The city falls behind 96 percent of all U.S. towns with 40,000 people or less in the category of affordable housing, according to a 2007 citizen survey Sedona officials commissioned from National Research Center in Boulder, Colo.

Median home prices in Sedona increased 77 percent between 2000 and 2006 while rents increased 40 percent, according to the city’s Housing Commission. But Sedona median household incomes only increased 13 percent, from $43,466 to $49,225.

The current median asking price of a single-family home in Sedona is about $586,000, according to Buyers Brokers Realty of Sedona. Townhomes and condominiums fetch about $390,000 apiece.

At those prices, the average Sedonan would have to earn $23 per hour to rent or $84.50 per hour to buy a median-priced home, the governor’s report stated. That is $30 more per hour than the Arizona community with the next highest housing costs: Flagstaff, where workers need to make $54.14 per hour to buy a median-priced home.

As a result, about 64 percent of the Sedona’s workforce lives outside of Sedona. By comparison, 80 percent of the workforce in neighboring Flagstaff actually lives in Flagstaff, according to Flagstaff’s 2007 Housing and Community Sustainability Nexus Study.

In Flagstaff, wages are keeping up with housing prices – sort of. In Sedona, however, Horner’s “regular people” must work like Manhattan-ites. They take on multiple jobs just to afford a decent trailer here.

Between 2000 and and 2006, Sedona’s unemployment rate was 2 percent, less than half the rate for Arizona or the U.S. Those who live and work in Sedona usually have two or more jobs, says Sedona Economic Planner Jodie Filardo.

After all, they want to enjoy the city’s red rock formations and soothing vibe just like everyone else. But a recent video testimonial prepared by the city’s own housing commission shows that most of Sedona’s workers end up with a window seat.

Rhonda Ross, a former Sedona resident, talks about why she caved in and moved to the unincorporated Village of Oak Creek nearby.

Ross tells the camera: “Living in Sedona is definitely a very important part of being here. I really would not want to be working all my jobs just to be living here, just to be having the majority of my income going to rent, bills and food.”

The city’s affordability crisis goes far beyond the lowest wage earners most people associate with affordable housing, says Sedona Housing Commission member Nate Oskar. It makes it hard to attract teachers, police officers, nurses, managers and other professionals because the salaries don’t match the incomes required to buy or rent in Sedona, he says.

SIMPLE SOLUTION NEEDS WORK

Guiding future development is the solution. Sedona’s new housing policy, enacted in December, gives the city some leverage to negotiate affordable housing with developers seeking approval for their projects.

The new rules ask to developers to set aside six to 12 percent of the units they build as affordable housing in order to get zoning approvals from the city. Only those with a household income that falls between 80 and 150 percent of the area’s median income are eligible to buy them.

The new rule is hardly unique to Sedona. It can be found in pricey urban markets outside Arizona, such as Carlsbad and Oceanside, Calif., just north of San Diego.

If the developer does not want to set aside units for affordable housing, the developer can choose to pay into a special fund. This fund directly supports the creation and maintenance of affordable housing elsewhere in Sedona through activities such as land acquisition, down-payment assistance and low-interest loans.

Most developers opt for this route. It allows them to get their project approved and meet affordable housing rules without selling their own units at a discount or having the “affordable housing” stigma attached to their project in particular.

The city offers a carrot in return. Sedona officials can waive or defer development fees for some or all of the units, review building plans more quickly or, on a case-by-case basis, bend the city’s land development codes to accommodate the affordable units. This includes making exceptions for lot coverage, building heights, lot area, lot dimensions and yard setbacks.

But there’s a catch to the new rules: Compliance is voluntary. State law does not allow the city to make its affordable housing rules a requirement, says Sedona Housing Planner Jessica Williamson.

Even so, Sedona’s new policy is the biggest tool in its shed so far for narrowing the state’s worst affordability gap. To create it, Sedona’s Housing Commission met with businesses, resorts, the Sedona Oak Creek Unified School District, the Verde Valley Medical Center, and five major Sedona employers over a three-year period to determine how the lack of affordable housing affects their interests.

The commission circulated two informational brochures. It hosted focus groups and presentations on density and how community participation can help blend affordable housing into the community without a ruckus.

Though local Realtors cried foul about the policy, some Sedona officials cried fair.

“Developers are getting a benefit for a benefit given,” City Councilman Rob Adams said recently.

Yet some of the authors of the rules, such as Sedona Housing Commission chairwoman Linda Martinez, admit that the rules are flawed. But City Councilman Harvey Stern said it’s a good start and that, ironically, the city can’t afford to study the affordable housing problem much longer.

Housing Commissioner Diane Smith agreed, saying, “Small solutions got away while we’ve been looking for a big solution” for 15 years.

The commission took an aggressive step on March 10. It won approval from the City Council to lobby state legislators to pass a new law that would allow local governments to make developers include some affordable housing through special “inclusionary” zoning.

The City Council voted 6-1 in favor of the lobbying, with vice mayor Jerry Frey opposed. The commission will seek help from other towns to find a legislator willing to sponsor the bill.

AFFORDABLE HOUSING IS DISAPPEARING

Whatever the solution is, officials better hurry. In the 12 years it took to create a housing commission and take a snapshot of the situation, much of Sedona’s older [read: affordable] housing has disappeared, giving way to exclusive subdivisions and swanky mansions.

Today, Sedona’s stock of affordable housing is eroding before residents’ very eyes. It has dwindled so much that neither the city nor the commission could offer an estimate on the losses.

That means most of the disappearances are anecdotal – a trailer park here, a few lots there.

In 2000, all but four of 12 trailers were removed from the former Laughing Coyote bar in West Sedona. The rest were removed when the bar sold in 2004. Those affordable units have not been replaced.
Two years ago, about 80 residents of Hawkeye RV Park in Uptown were evicted to make way for about 150 condominiums and 12 affordable off-site units, all of which have yet to be built.

Now, because of funding issues, the developer is asking the city for an 18-month extension – meaning those residents might have had affordable housing for more than three more years. Windsong Trailer Park in West Sedona has sold and is planned for development.

Don Campbell, who is re-developing the Oak Creek Mobile Lodge where Horner lives, agreed to reduce the density of his project. He will come back to the city with five fewer units, which includes two affordable units. If the city approves the project, another 53 units of affordable housing will disappear without comment from the city’s Planning and Zoning Commission.

So forget houses. Sedona’s workers should just toughen up and find an apartment, right?

Well, Sedona lags far behind in that category, too. Apartments account for just 4 percent of Sedona’s housing stock, compared to 23 percent of Arizona’s housing stock overall, according to a 2006 city study by Kuehl Enterprises.

The same study showed that Sedona also lags behind other resort communities. Multifamily housing makes up 20 percent and 13 percent of the land uses in Aspen and Durango, Colo., respectively. Sedona clocks in at 4 percent.

DIM FUTURE IF SOLUTION NOT FOUND

So far, Sedona’s new affordable housing policy has netted at least 13 new affordable units and $186,984 in the special fund. That’s almost enough money to buy one bedroom in a median-priced, three-bedroom Sedona home.

But Sedona housing officials aren’t waiting around to see more successes. They are fast at work exploring other strategies such as inclusionary zoning, which would make some affordable units mandatory for any residential project.

Among those items is a request for help from Republican Andrew Tobin and other state lawmakers who represent the area. Although Tobin acknowledges the problem, he says the state’s projected billion-dollar shortfall and the Capitol’s bias toward helping big cities will hurt Sedona’s chances.

In a March 2 email to TZR, Tobin wrote, “It is not likely that our rural communities will get much help from an urban-dominated legislature.”

Tobin also wrote that beating the affordable housing crisis has to happen at the local level through partnerships between city governments and developers to build high-density, multifamily projects.

But Sedona has just 59 acres left for such projects. About 80 percent of the city’s developable land is spoken for.

Tobin also said he was unsure if any bills addressing affordable housing had made it past legislative committees, the Legislature’s lowest rungs for new bills to become laws.

Even if they did, he wrote, the bills would probably get stuck in the appropriations committee – which controls the state’s purse strings – because “funding is not available this year or next, as [far as] I can tell.”

SEDONA’S AFFORDABLE CLOCK IS TICKING

This leaves Sedonans like Ronald Pauley to find their own solution while local and state officials debate the ins and outs of the city’s affordable housing crisis.

Pauley owns a successful business that repairs restaurant equipment. He has rented a two-bedroom apartment in Uptown Sedona since 2002.

The view from Pauley’s affordable apartment used to be the jagged red hills below Wilson Mountain. Now, his view is the back of a new three-story timeshare condominium built about 30 feet from his window.

“I know they are timeshares because I see the people who come and go,” he says.

None of the mountains are visible. “How did they get three stories?” he asks, perplexed.

These days, media coverage of land speculation is driving up land values and rental prices in Sedona. Pauley says he is close to moving out of Sedona because the affordability gap is turning into a chasm.

Fearing reprisal from his landlord, Pauley spoke to TZR under the condition that his real name not be used for this story.

“My landlord started raising the rent after reading about higher average rent prices in the newspaper,” Pauley says. Last year, he adds, his rent rose three times in one week. It began at $600 and rose to $625, then $650, then $700.

Pauley says the eight-unit apartment building was built in 1972 by its current owner. The construction is not up to code. There are gaps between the original wood siding and the newer brick façade. The PVC pipes rattle inside the walls, he says, and methane gas vents into the attic, not outside the dwelling.

“I’ve got a working smoke detector and an exit strategy,” Pauley says with a grin.

= = =

>>Email the editor at aklaw@zoniereport.com.

Sedona’s trailer park vortex

I was in Sedona over the weekend for a travel story that will appear in PHOENIX magazine. For anyone who has never been to Sedona, please visit this wonderful town… before new subdivisions and traffic have erased its character entirely.

So there I was, hiking, eating steak and mingling with locals. They talked about “spiritual” vortexes linked to the area’s early Native Americans. Some say these vortexes are places where the earth is abnormally healthy; others say they are places where mighty energy fields exist. As a journalist, I was skeptical.

Aw, what the hell. You may get to see my “aura” photos in the April edition of PM.

But during the assignment, I hatched an idea about a different kind of Sedona story, one that talks about the town’s natives. These are the local people who are Sedona’s original retirees and those who work in the shops that serve the rich out-of-towners who just built that McMansion tucked into the Red Rock. These people live in trailer parks far from any self-enlightening vortex. If anything, these people are stuck in a vortex all their own.

And so, I wondered: What about a story on Sedona life from this perspective, and what will happen to these trailer park-dwellers as Sedona gets more and more crowded? I can see a slice-of-life story with some interesting predictions.